The Pr. Commissioner of Customs ... Vs Veena Shipping Agency Pvt. LTD On 19 April, 2018

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the Customs Act, 1962
Section 146 in the Customs Act, 1962
Section 20 in the Customs Act, 1962
Indair Carrier Pvt. Ltd. vs Commissioner Of Customs ... on 12 May, 2016
Unison Clearing (P) Ltd. vs Commissioner Of Cus. (General) on 21 February, 2006
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Bombay High Court
The Pr. Commissioner Of Customs ... vs Veena Shipping Agency Pvt. Ltd on 19
April, 2018
Bench: S.C. Dharmadhikari
SSK 1 Custom Appeal 88-16
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
CUSTOMS APPEAL NO.17 OF 2016
The Principal Commissioner
of Customs (General) Mumbai .. Petitioner
Versus
Unison Clearing Pvt.Ltd .. Respondent
WITH
Versus
Rudolph Thomas Lobo & Co.(P) Ltd .. Respondent
WITH
Versus
M.D.Shipping Agency .. Respondent
WITH
Versus
Maa Krupa Forwarders Pvt.Ltd .. Respondent
WITH
CUSTOMS APPEAL (L) NO.49 OF 2017
Versus
Mahendra Shipping Agency .. Respondent
::: Uploaded on - 20/04/2018 ::: Downloaded on - 21/04/2018

01:54:57 :::
WITH
Versus
K.M.Commercial Services P.Ltd .. Respondent
WITH
Versus
Kismat Clearing Agency .. Respondent
WITH
Versus
Mehul and Co. .. Respondent
WITH
Versus
Veena Shipping Agency Pvt.Ltd .. Respondent
WITH
Versus
Ukinex Commercial Services Customs
Broker (CHA firm) .. Respondent
WITH

01:54:57 :::
Versus
SSS Sai Shipping Services P.Ltd .. Respondent
WITH
NOTICE OF MOTION (APPEALS) LODGING NO.2404 OF 2017
IN
CUSTOMS APPEAL LODGING NO.49 OF 2017
Versus
Mehendra Shipping Agency .. Respondent
WITH
NOTICE OF MOTION (APPEALS) LODGING NO.2491 OF 2017
IN
Versus
K.M. Commercial Services P.Ltd .. Respondent
WITH
NOTICE OF MOTION (APPEALS) LODGING NO.2495 of 2017
IN
Versus
Kismat Clearing Agency .. Respondent
WITH
NOTICE OF MOTION (APPEALS) NO.245 of 2016
IN

01:54:57 :::
SSK 4 Custom Appeal

88-16
Versus
Unison Clearing Pvt Ltd .. Respondent
WITH
NOTICE OF MOTION (APPEALS) NO.1 of 2017
IN
Versus
Unison Clearing Pvt Ltd .. Respondent
...
Mr.Pradeep Jetly for the appellants and applicants in Notice of
Motion.
Mr.Prakash Shah with Mr.Jas Sanghavi, Mr.Viraj Y. Bhate and
Ms.Neha Ahuja i/b Prompt Legal for respondent in CUAPP
17/2016.
Mr.Prakash Shah with Mr.Jas Sanghavi and Viraj Y. Bhate i/b
PDS Legal for respondent in CUAPP 9/2016 and CUAPPL
88/2016.
Mr.Prakash Shah for Amicus Curie in CUAPP 88/16.
Mr.Sujay Kantawala with Brijesh Pathak and Kartik Vig for
respondents in CUAPP 6/2017 and CUAPP 4/2017.
Mr.Deepak N. Salvi with Ms.Tanvi Sathe and Mr.Sahil D. Salvi
for respondent in CUAPPL 54/2017.
CORAM : S. C. DHARMADHIKARI &
SMT. BHARATI H. DANGRE, JJ.
RESERVED ON : 9th FEBRUARY 2018.
PRONOUNCED ON : 19th APRIL, 2018

JUDGMENT: - (Per Smt.Bharati H.
Dangre, J)
1 This group of appeals came to be admitted on the following
substantial question of law.

(1) Whether the CESTAT is right in law in setting
aside the order or suspension of the Custom Broker Licence on the ground of
delay between the suspension and the notice of deviation or omission,
ignoring that DRI letter dated 24th July 2014 and the Custom Broker Licence
was suspended on 8th August 2014 ?
(2) Whether the Appellate Tribunal completely ignored the two decisions of
this Court relied upon in paragraph 3, do not lay down as an absolute
proposition of law that the delay in taking immediate action of suspension
vitiates the action of the Commissioner of suspending the licence?
Since all the
appeals involve the similar question of law and particularly whether the
inquiry report has to be submitted from the period of 90 days from the date of
issue of notice under Sub-regulation (1) of Regulation 20 of 2013, all the
appeals were directed to be listed and heard on the same date. It was agreed
by both the parties that all the appeals whether admitted, pending for
admission or otherwise, can then be conveniently disposed of. Hence, all the
aforesaid appeals were heard together and the parties advanced their
submissions on the said point of law by referring to the distinct facts involved
in each appeal.
The Principal Commissioner of Customs SSK 6 Custom Appeal 88-16

(General),
who has filed the appeals, is represented by the learned Counsel Mr. Jetley
who would argue that the provision contained in Regulation 19 and 20 of the
CBLR-
2013 is to be construed as directory, whereas, the learned counsel
representing the Customs Broker Licencee - respondents in the appeals, would
urge the Court to construe the said provision as mandatory and prays for
upholding the order passed by CESTAT, in the light of the various judgements
delivered by different High Courts construing the said provisions to be
mandatory.
2 For effective adjudication of the appeals, it would be necessary to refer to

the statutory schemes as contained in the Customs Act, 1962 as well as in the
Customs House Licensing Regulation ("CHLR", for short) as notified from time
to time.
The Customs Act, 1962 recognizes the 'Customs Brokers' and contains a
provision for grant of licence in their favour in accordance with the
Regulation. Section 146 imposes restrictions on any person to carry on
business as Customs Broker relating to the entry or departure of SSK 7 Custom
Appeal 88-16
conveyances or the import or export of goods at any customs
station unless such a person holds a licence granted in this behalf in
accordance with the Regulation. The Central Board of Excise and Custom
("CBEC", for short) under the Central Boards Revenue Act, 1963, is empowered
to make Regulations for the purpose of carrying out the provisions of Section
146 and authorises it to make Regulation which may provide for the authority
by whom licence may be granted, period of validity of such licence,
qualification of a person who may apply for such licence, and also to prescribe
circumstances in which the licence may be suspended or revoked.
In exercise of power conferred by Sub-section (2) of Section 146 of the Customs

Act, 1962, Regulations have been framed from time to time and the regulations
which are in existence and governing the group of appeals is the Customs
House Licensing Regulation of 2013 ("CHLR-2013", for short).
3 The Customs House Agent Licence Regulation, 2004 ("CHALR-2004", for

short) were brought into force by SSK 8 Custom Appeal 88-16
notification
issued on 23rd March, 2004 by the Central Board of Excise and Customs. The
Regulation defines Custom House Agent as an agent for transaction of any
business relating to the entry or departure of conveyances or import or export
of goods at any customs stations. Regulation 20 contained a provision for
suspension or revocation of licence by the Commissioner of Customs on the
grounds mentioned therein. Sub-clause (2) of the said Regulation authorizes
the Commissioner of Customs to suspend the licence of a CHA pending or
contemplating an inquiry, where immediate action was necessary in
appropriate cases. Regulation 22 prescribed the procedure for suspension or
revocation of licence under Regulation 20. Regulation 22 reads thus:
22. Procedure for suspending or revoking licence under Regulation 20.
(1) The Commissioner of Customs shall issue a notice in writing to the Customs
House Agent within ninety days from the date of receipt of offence report,
stating the grounds on which it is proposed to suspend or revoke the licence
and requiring the said Customs House Agent to submit within thirty days to
the Deputy Commissioner of Customs or Assistant Commissioner of Customs
nominated by him, a written statement of defense and also to specify in the
said statement whether the Customs House Agent desires to be heard in
person by the said Deputy Commissioner of Customs or Assistant SSK 9
Custom Appeal 88-16
Commissioner of Customs.
Provided that the procedure prescribed in regulation 22 shall not apply in

respect of the provisions contained in sub-regulation (2) to regulation 20.
(2) The Commissioner of Customs may, on receipt of the written statement

from the Customs House Agent, or where no such statement has been received
within the time-limit specified in the notice referred to in sub-regulation (1),
direct the Deputy Commissioner of Customs or Assistant Commissioner of
Customs to inquire into the grounds which are not admitted by the Customs
House Agent.
(3) The Deputy Commissioner of Customs or Assistant Commissioner of
Customs shall, in the course of inquiry, consider such documentary evidence
and take such oral evidence as may be relevant or material to the inquiry in
regard to the grounds forming the basis of the proceedings, and he may also
put any question to any person tendering evidence for or against the Customs
House Agent, for the purpose of ascertaining the correct position.
(4) The Customs House Agent shall be entitled to cross-examine the persons
examined in support of the grounds forming the basis of the proceedings, and
where the Deputy Commissioner of Customs or Assistant Commissioner of
Customs declines to examine any person on the grounds that his evidence is
not relevant or material, he shall record his reasons in writing for so doing.
(5) At the conclusion of the inquiry, the Deputy Commissioner of Customs or
Assistant Commissioner of Customs shall prepare a report of the inquiry
recording his findings and submit his report within ninety days from the date
of issue of a notice under sub-regulation (1).
(6) The Commissioner of Customs shall furnish to the Customs House Agent a
copy of the report of the Deputy Commissioner of Customs or Assistant SSK 10
Custom Appeal 88-16
Commissioner of Customs, and shall require the Customs
House Agent to submit, within the specified period not being less than thirty
days, any representation that he may wish to make against the findings of the
Deputy Commissioner of Customs or Assistant Commissioner of Customs.
(7)
The Commissioner of Customs shall, after considering the report of the inquiry
and the representation thereon, if any, made by the Customs House Agent,
pass such orders as he deems fit within ninety days from the date of
submission of the report by the Deputy Commissioner of Customs or Assistant
Commissioner of Customs, under sub-
regulation (5).
(8) Any Customs House Agent aggrieved by any decision or order passed under
regulation 20 or sub-
regulation (7) of regulation 22, may prefer an appeal
under section 129A of the Act to the Customs, Central Excise and Service Tax
Appellate Tribunal established under sub-section (1) of section 129 of the Act.
The CHALR-2004 came to be amended by notification dated 8th April, 2010

and the time limit came to be incorporated in sub-clause (2) of Regulation 20
and sub-
clause (3) came to be added to the same Regulation where it
contemplated a post-decisional hearing on suspension of a licence, within a
period 15 days from the said suspension and thereafter passing of an order
revoking the suspension or continuing it. Sub-Regulation (2) and (3) which
came to be inserted read thus :
(2) Notwithstanding anything contained in SSK 11 Custom Appeal 88-16

sub-
regulation (1), the Commissioner of Customs may, in appropriate cases where
immediate action is necessary, (within fifteen days from the date of receipt of
a report from investigating authority, suspend the licence) of a Customs House
Agent where an inquiry against such agent is pending or contemplated.
(3)
Where a licence is suspended under sub-
regulation(2), notwithstanding the
procedure specified under regulation 22, the Commissioner of Customs may,
within fifteen days from the date of such suspension, give an opportunity of
hearing to the Customs House Agent whose licence is suspended and may pass
such order as he deems fit either revoking the suspension or continuing it, as
the case may be, within fifteen days from the date of hearing granted to the
Customs House Agent".
4 The CBLR-2013 was brought into force by notification dated 21st June, 2013
in exercise of powers conferred by Sub-section (2) of Section 146 of Customs
Act, 1962 by superseding the existing CHALR-2004. The present case revolves
around the existing CBLR-2013 where a specific time limit has been prescribed
under Regulation 19, which contains a provision for suspension and
revocation of licence. Further, a time frame has also been prescribed in
Regulation 20 which prescribes a procedure for revocation of licence or
imposition of penalty. The grievance raised in the set of SSK 12 Custom Appeal
88-16
Appeals before us is either that the notice was not issued by the Revenue
to the customs broker within stipulated period of 90 days from the date of
receipt of offence report or cases, where the entire inquiry has not been
completed within the time limit specified in Regulation 20.
As per the CBLR-2013, a customs broker means a person licensed under the
Regulations of 2013 to act as an agent for the transactions of any business
relating to the entry or departure of conveyances or the import or export of
the goods at any customs station to hold a licence. The Regulation, 2013 sets
out the procedure for procuring such licence on an application being
preferred to the Commissioner of Customs having jurisdiction over the area
where the applicant intends to carry on his business. Regulation 5 of the
Regulation, 2013 then set out the conditions to be fulfilled by the applicant, so
as to be considered fit for grant of licence and contemplates an application to
be made either by an individual applicant or by a firm or company and then
sets out the qualification required to be possessed by the partner of a firm or
Director of a company or an authorised employee, SSK 13 Custom Appeal 88-
16
who may handle the customs work. Regulation 6 prescribes for conduct of
written as well as oral examination by the DGICCE. Regulation 7 provides for
grant of Licence by the Commissioner of Customs on payment of Rs.5,000/- to
an applicant who has passed oral examination within two months of the
declaration of the result. The said licence granted under the Regulation, 2013,
is held to be valid for a period of ten years from the date of its issuance and is
entitled for renewal from time to time as per the procedure prescribed.
Regulation 11 sets out obligations to be discharged by the customs broker
which inter alia requires exercise of due diligence on the part of the customs
broker and discharge of his duties as customs broker with utmost speed and
efficiency and without any delay amongst other obligations.
5 In the present set of appeals we are concerned with Regulation 18,

Regulation 19 and Regulation 20, which deals with revocation/suspension of
licences and the procedure for doing so or for imposition of penalty. It would
be useful to reproduce the said Regulations:

"18. Revocation of licence or imposition of
penalty-
The Commissioner of Customs may, subject to the provisions of regulation 20,
revoke the licence of a Customs Broker and order for forfeiture of part or
whole of security, or impose penalty not exceeding fifty thousand rupees on a
Customs Broker on any of the following grounds, namely :-
(a) Failure to comply with any of the conditions of the bond executed by him
under regulation 8;
(b) failure to comply with any of the provisions of these regulations, within his
jurisdiction or anywhere else;
(c) committing any misconduct, whether within his jurisdiction or anywhere
else which in the opinion of the Commissioner renders him unfit to transact
any business in the Customs Station;
(d) adjudicated as an insolvent;
(e) of unsound mind; and
(f) has been convicted by a competent court for
an offence involving moral turpitude.
Provided that the imposition of penalty or any action taken under these
regulations shall be without prejudice to the action that may be taken against
the Customs Broker or his employee under the provisions of the Customs Act,
1962 (52 of 1962) or any other law for the time being in force.
Regulation 19 -
Suspension of licence:
(1) Notwithstanding anything contained in regulation 18, the Commissioner of
customs may, in appropriate cases where immediate action is necessary,
suspend the licence of a Customs Broker where an inquiry against such broker
is pending or contemplated.
(2) Where a licence is suspended, give an opportunity of hearing to the

Customs Broker whose SSK 15 Custom Appeal 88-16
licence is suspended and
may pass such order as he deems fit either revoking the suspension or
continuing it, as the case may be, within fifteen days from the date of hearing
granted to the Customs Broker:
Provided that in case the Commissioner of Customs passes an order for

continuing the suspension, the further procedure thereafter shall be as
provided in Regulation 20.
20. Procedure for revoking licence or imposing penalty:
(1) The Commissioner of Customs shall issue a notice in writing to the Customs
Broker within a period of ninety days from the date of receipt of an offence
report, stating the grounds on which it is proposed to revoke the licence or
impose penalty requiring the said Customs Broker to submit within thirty days
to the Deputy Commissioner of Customs or Assistant Commissioner of Customs
nominated by him, a written statement of defense and also to specify in the
said statement whether the Customs Broker desires to be heard in person by
the said Deputy Commissioner of Customs or Assistant Commissioner of
Customs.
(2) The Commissioner of Customs may, on receipt of the written statement

from the Customs Broker, or where no such statement has been received
within the time-limit specified in the notice referred to in sub-regulation (1),
direct the Deputy Commissioner of Customs or Assistant Commissioner of
Customs, as the case may be, to inquire into the grounds which are not
admitted by the Customs Broker.
(3) The Deputy Commissioner of Customs or Assistant Commissioner of

Customs, as the case may be, shall, in the course of inquiry, consider such
documentary evidence and take such oral evidence as may be relevant or
material to the inquiry in regard to the grounds forming the basis of the
proceedings, and he may also put any question to any person tendering
evidence for or against the Customs Broker, for the purpose of ascertaining
the SSK 16 Custom Appeal 88-16
correct position.
(4) The Customs Broker shall be entitled to cross-examine the persons
examined in support of the grounds forming the basis of the proceedings, and
where the Deputy Commissioner of Customs or Assistant Commissioner of
Customs declines to examine any person on the grounds that his evidence is
not relevant or material, he shall record his reasons in writing for so doing.
(5) At the conclusion of the inquiry, the Deputy Commissioner of Customs or

Assistant Commissioner of Customs, as the case may be, shall prepare a report
of the inquiry and after recording his findings thereon submit the report
within a period of ninety days from the date of issue of a notice under sub-
regulation (1).
(6) The Commissioner of Customs shall furnish to the Customs Broker a copy
of the report of the Deputy Commissioner of Customs or Assistant
Commissioner of Customs, as the case may be, and shall require the Customs
Broker to submit, within the specified period not being less than thirty days,
any representation that he may wish to make against the said report.
(7) The Commissioner of Customs shall, after considering the report of the
inquiry and the representation thereon, if any, made by the Customs Broker,
pass such orders as he deems fit either revoking the suspension of the license
or revoking the licence of the Customs Broker or imposing penalty not
exceeding the amount mentioned in regulation 22 within ninety days from the
date of submission of the report by the Deputy Commissioner of Customs or
Assistant Commissioner of Customs, under sub-regulation (5):
Provided that no order for revoking the license shall be passed unless an
opportunity is given to the Customs Broker to be heard in person by the
Commissioner of Customs.
6 A perusal of the aforesaid regulations would
SSK 17 Custom Appeal 88-

16
reveal that a procedure is prescribed for revocation of a licence of a customs

broker and for imposition of penalty on the grounds set out in Regulation 18.
Regulation 19 provides for suspension of a licence in contemplation of an
inquiry against a broker or pending an inquiry, which authorizes the
Commissioner of Customs to suspend the licence of the customs broker
forthwith, where immediate action is necessary. Sub-section 2 of Regulation 19
contemplates a post decisional hearing where the licence is suspended in sub-
clause (1) and after affording an opportunity of hearing to the customs broker,
whose licence is suspended, the Commissioner of Customs is authorised to
pass such order as he deems fit either revoking the suspension or continuing
it, as the case may be. However, when the Commissioner passes an order for
continuing the suspension, it is imperative for him to follow the procedure
under Section 20.
The procedure for revocation of licence is provided in Regulation 20 and the

issue involved before us in the present set of appeals is whether the time
frame prescribed in the said Regulation is mandatory or directory. If SSK 18
Custom Appeal 88-16
the time frame is mandatory then the necessary
consequences of not completing the inquiry within the time stipulated would
result into restoration of a licence and declaring the action to revoke the
licence as being invalid. If it is construed as directory, then even on expiry of
period of 90 days, the procedure for revocation of licence which is initiated
would continue and mere failure to adhere to the time line prescribed in the
Regulation would not confer a positive benefit in favour of the customs
broker.
7 In the background of the statutory provisions, we would deal with the

submissions advanced on behalf of the parties. We have extensively heard Mr.
Jetley appearing for the Principal Commissioner of Customs, who would finds
fault with the impugned orders passed by the said CESTAT. Mr. Jetley would
submit that the CESTAT has erred in holding the period prescribed in the
CBLR-2013 to be imperative and in holding that there is no provision for
extension of the time line prescribed for completion of proceedings. He would
argue that the findings of the CESTAT that the learned Commissioner did not
adhere to the time line prescribed for SSK 19 Custom Appeal 88-16
completion
of inquiry proceedings and therefore he has no legal right to keep the customs
broker licence under suspension for unlimited period, is erroneous. He would
submit that reliance placed on the judgments of the Tribunal, wherein it had
consistently taken a view that if inquiry proceedings are not completed within
overall period of nine months, a time line prescribed in CBLR-2013, the
suspension of the customs broker licence cannot be continued do not lay down
correct position of law. He would submit that the Tribunal has erred in taking
the said view in the backdrop of the judgment of the same Tribunal of CESTAT,
West Zonal Bench, Mumbai, in the case of Unison Clearing Pvt Ltd vs.
Commissioner of Customs (General Mumbai) to which one of the Member
Judicial (Ramesh Nair) was a party. He would place heavy reliance on the said
judgment delivered by the Tribunal in Appeal No.C/85867/2015-MUM on 5th
June, 2015, where the Tribunal by its exhaustive judgment has held that the
time line prescribed in the CBLR-2013 is construed to be directory and the
matter is closed on this basis. He would submit that the purpose of Regulation
would get defeated and SSK 20 Custom Appeal 88-16
so would the intention of
legislature in framing the Regulation. He would submit that the Tribunal in
the said judgment had held that since there are no consequences provided in
the regulation for non-adherence of the time period for conducting the
inquiry, the non-compliance of the time line cannot become fatal to the
outcome of inquiry. Mr. Jetly would invite our attention to the observations
made by the Tribunal in paragraph 4.2 of the judgment and to the conclusion
drawn by it that the time line laid down in the Regulations are directory in
nature. According to the learned Counsel, the duty of a customs house agent is
to render assistance in the export and import business at the port and the
purpose of the the Regulation, 2013 is to streamline the working of the
customs brokers. The learned Counsel Mr. Jetly would submit that if the
provision is construed as mandatory, it would result into serious
consequences but he would fairly submit that even if it is construed to be
directory, it does not mean that it is open for the custom authorities to
continue the suspension for an indefinite period.
The learned Counsel would submit that an inquiry SSK 21 Custom Appeal 88-
16
and the proceedings nonetheless are required to be completed within a
reasonable period and no absolute principle can be laid down as to what is
"Reasonable period". According to him, what is Reasonable period would have
to be determined in each and every case depending on the peculiar facts and
circumstances of the case and he would state before us several instances
where the delay in completion of inquiry is on account of some acts of the
customs broker in an attempt to prolong the inquiry beyond the prescribed
period and in such case, the delay may not be attributable to the Revenue. In
such circumstances, Mr. Jetly would argue that it is not permissible for the
customs broker to seek restoration of his licence by taking advantage of his
own wrong merely on the ground that Regulation 20 mandates that the
inquiry should be concluded within 90 days. He would fairly submit that the
checks and balances are to be evolved so that the inquiry and proceedings are
not delayed indefinitely as it hampers the brokerages of the customs broker.
At the same time, the time limit should not be so strictly adhered to, even in
cases of serious lapse on the part of the customs broker and where the inquiry
involves certain complicated facts. Merely because SSK 22 Custom Appeal 88-
16
the inquiry was not completed within a stipulated period, the customs
broker may not be allowed to walk free, as his suspension cannot be
continued beyond the period prescribed in the Regulation and his license need
not be restored.
Per contra, the learned counsel for the Respondent Mr.Prakash Shah, would
vehemently argue that the whole purpose of Regulation 20 is to complete the
proceedings initiated against the customs house agent/custom broker in an
expeditious manner. According to the learned Counsel Mr. Shah, the
suspension cannot be permitted to be continued indefinitely. He would submit
that there is specific object in streamlining the procedure and prescribing the
time line for conduct and completion of inquiry and for continued suspension
of a licence. According to him, if the inquiry is prolonged for no reason and a
licence of the customs broker is suspended and on culmination of the inquiry
if the charges are not proved, in that contingency it would result into immense
loss of earning and loss of livelihood to such customs broker. He would submit
that the said Regulations and the time limit have been framed by a responsible
authority as high as the CBEC itself. He would
invite attention of this Court to the circular No.9/10-CUS, dated 8th April, 2010
and would submit that the Government of India, Ministry of Finance
(Department of Revenue), Central Board of Excise and Custom, New Delhi, had
issued the said circular and it contains a preface reflecting that it has been
brought to the notice of the Board by certain field formations that they are
facing difficulties in issuance of CHA Licence for eligible person and in
implementation of Customs House Agents Licensing Regulation, 2004. All the
aforesaid issues came to be examined by the board in consultation with the
custom field formation in the board meeting and there was also a meeting
held with the Chief Commissioner of Customs having jurisdiction over major
customs houses and thereafter the decision was taken to provide a time
stipulation for completion of proceedings of inquiry, on suspension of a
licence. In this background, Mr. Shah would submit that the provisions in
regard to the time limit contained in the CBLR- 2013 need to be construed as
mandatory.
He would rely upon the series of judgments SSK 24 Custom Appeal 88-16
delivered by the Hon'ble Delhi High Court and Madras High Court, which have
consistently taken a view that the time limit prescribed in the Regulation is
mandatory and sacrosanct. The High Courts had taken a view that the time
limit in the CHALR-2004 for issuance of show cause notice to the CHA licence
holder and completion of the inquiry within 90 days of its issuance are
mandatory and the said time limit has been engrafted in Regulation 22 of
CHALR-2004 by notification dated 8th April, 2010. The judgments of these
Courts have consistently emphasised the mandatory nature of the aforesaid
time limit in several of its decisions and the violation of the said time line has
resulted into declaring the action of the Commissioner of Customs revoking
the CHA licence to be unsustainable in law. The Hon'ble Madras High Court
has also laid great emphasis on the time limit prescribed in the back drop of
its object, being to curb the smuggling of goods and by considering the object
of the provision, and specifically by referring to the transformation of the CHA
Regulation into CBLR-2013 Regulations. The Court had held that earlier
Regulation did not have time limit SSK 25 Custom Appeal 88-16
to complete
the proceedings but by Circular No.9/10 dated 8th April, 2010, the necessity to
specify the time limit for initiating action was addressed by the board after
field inspection and by notification dated 8th April, 2010 prescribing the time
period for initiating action and completion of the procedure was introduced
and given effect to by notification dated 20th January, 2014. The Hon'ble
Madras High Court has further held that under CBLR-2013 the necessity was
felt to prescribe a time schedule on the recommendation of the CBEC, a
statutory authority and therefore, a time frame came to be consciously
introduced in the Regulation and the use of the term "shall" in the Regulation
makes it imperative to construe the said time schedule as "mandatory". In this
regard, Mr. Shah relies on the following decisions:
(1) Masterstroke Freight Forwarders P. Ltd. vs. C.C.(I), Chennai-I, reported in

2016 (332) E.L.T. 300 (Mad.)
(2) Patriot Frieght Logistics System vs.
Commissioner of Cus., Chennai, reported in 2017 (350) E.L.T. 59 (Mad).
(3) A. M. Ahamed & Co. vs. Commissioner of Customs (Imports), Chennai,

reported in 2014 SSK 26 Custom Appeal 88-16
(309) E.L.T. 433 (Mad).
(4) M/s. Maakrupa Forwarders Pvt Ltd vs. Commissioner of Customs (G),
Mumbai, reported in 2016-TIOL-2899-CESTAT-MUM.
(5) Sharp Logistics Pvt Ltd vs. Commissioner of Cus. (General), Mumbai,
reported in 2012 (286) E.L.T. 704 (Tri.-Mumbai).
(6) Overseas Air Cargo Services vs. Commr. Of Cus. (General), New Delhi,
reported in 2016 (340) E.L.T. 119 (Del.)
(7) M/s. Zen Cargo Movers Pvt Ltd. vs.
Commissioner of Customs, New Delhi, reported in 2016-TIOL-524-CESTAT-DEL.
(8) Saro International Freight System vs. Commr. Of Cus., Chennai-VIII,
reported in 2016 (334) E.L.T. 289 (Mad.)
(9) S.K. Logistics vs. Commr. Of Cus.
(General), New Delhi, reported in 2016 (331) E.L.T. 486 (Tri.-
Del.).
(10) Commissioner of Customs (General) vs. S.K.Logistics, reported in 2016

(337) E.L.T. (Del.).
(11) Sunil Dutt vs. Commissioner of Cus.
(General) NCH, reported in 2016 (337) E.L.T. 162 (Del.).
(12) Indair Carrier Pvt. Ltd. vs. Commissioner of Customs (General), reported
in 2016 (3370 E.L.T. 41 (Del.).
(13) Trinity Sea & Air Pvt Ltd vs. Commr of Cus (Import General), New Delhi,
reported in 2017 (350) E.L.T. 293 (Tri.-Del.).
(14) Sowparnika Shipping Services vs. Commr. Of Customs, Chennai-VIII,

reported in 2017 (352) E.L.T. 286 (Mad.)
8 The
question that arises for determination in the present set of appeals is whether
the time line as prescribed in Regulation 20 is directory in nature or is
mandatory. Perusal of the scheme of Regulation and specifically Regulation 18,
19 and 20 empowers the Commissioner of Customs to revoke the licence of
custom broker and order for forfeiture of part or whole of its security or to
impose penalty not exceeding Rs.50,000/- on a custom broker on any of the
following grounds i.e. (a) failure to comply with any of the conditions of bond
executed by him under Regulation 8. (b) failure to comply with any of the
provisions of these Regulations, within its jurisdiction or anywhere. (c)
committing any misconduct, whether within its jurisdiction or anywhere else
which in the opinion of the Commissioner renders him unfit to transact the
business in Customs station. (d) adjudicated insolvent, (e) is of unsound mind
and (f) has been convicted by a competent court for an offence involving
moral turpitude.
The customs house agent have an important role to play in the entire scenario.
He is the person, who acts as an SSK 28 Custom Appeal 88-16
agent and
transact the business and has a direct access to the port since he assists the
assessee covered by the Customs Act to facilitate the entry or departure of
conveyance or the import or export of goods at any customs stations. Since the
customs house agent has a direct access to the port, the revenue intended that
there should be a regime of discipline governing such customs house agent
and only a person who is qualified and in know how of the business relating
to the customs would be entitled to be conferred with a licence to act as a
customs house agent. To maintain the regime of discipline, the customs house
agent is granted a license on passing of an examination and before granting
the licence it is imperative for him to enter into an option in Form - D and, if
necessary, a surety option in Form - E to continue observation of these
regulations and require him to furnish a bank guarantee, postal security and
the national saving certificate in the name of the Commissioner of Customs for
an amount of Rs.50,000/- for carrying on a business of customs house agent.
The customs house licensing regulation also fastens the customs house agent
with certain obligation since he acts on behalf of the Company, firms or
individuals and in turn acts as SSK 29 Custom Appeal 88-16
their agent and
Regulation 13 in detail sets out the obligation of the customs house agent,
which mandates him to follow a regime of discipline while he acts so and
while he discharges his duty in the said capacity.
In order to continue the regime of discipline, the Commissioner of Customs is

empowered to revoke a licence of the customs house agent and order
forfeiture of his security if the customs house agent fails to comply with any of
the conditions of the bond executed by him and he fails to comply with the
provisions of the Regulation or indulge into an act which would amount to
"misconduct". The licence of customs house agent, therefore, continues subject
to his abiding by the obligations imposed upon him and he acting in a fair
manner as expected in terms of the regulations. The Regulation 19 authorises
the Commissioner of Customs to suspend the licence if it is so required to be
suspended immediately even without an inquiry against the customs broker
being pending or even when it is not initiated, but only contemplated.
Regulation 19 sub-clause (2) contemplates a post decisional hearing when a
licence has been suspended and the SSK 30 Custom Appeal 88-16
Commissioner of Customs was required to take an action immediately without
following the procedure of issuing of show cause notice and sub-clause (2) of
Regulation 19 contemplates an opportunity of hearing to be afforded within
15 days from the date of suspension. On consideration of the submission of the
customs broker, and on being afforded an opportunity of hearing, the
Commissioner of Customs has two options, he may either revoke the
suspension or he may continue the same. If the Commissioner of customs
decides to continue the suspension then he would follow the procedure
prescribed in Regulation 20.
Regulation 20 prescribes a procedure for revoking a licence or imposing

penalty. Sub-clause (1) of Regulation 20 requires a Commissioner of Customs to
issue notice in writing to a customs broker within a period of 90 days from the
receipt of an offence report stating the grounds on which it is proposed to
revoke the licence or impose the penalty to the customs broker, and permit
him to submit his say within 30 days to the Deputy Commissioner of Customs
or Assistant Commissioner of Customs. If the customs broker expresses an SSK
31 Custom Appeal 88-16
intention to be heard in person by the Deputy
Commissioner of Customs or Assistant Commissioner of Customs, he is
permitted to do so and sub-Regulations (2) and (3) then sets out the procedure
to be followed on receipt of the written statement or when no such written
statement is received and the material that would be taken into consideration
for the purposes of ascertaining the correct position. The Regulation also
affords an opportunity of cross-examination of the persons examined in
support of the grounds forming the basis of the proceedings. Sub-clause (5) of
Regulation 20 mandates the Deputy Commissioner of Customs or Assistant
Commissioner of Customs to prepare a report of inquiry and forward the
same within 90 days from the date of issuance of notice to the Commissioner
of Customs. The customs broker is then entitled to get a copy of the said report
and he is also permitted to submit a representation if he intends to do so. As
per clause (7) of Regulation 20 the Commissioner of Customs on consideration
of report of inquiry received by him and the representation from a customs
broker, if any, would pass the final order which he deems fit either revoking
the suspension of licence or revoking the licence of customs broker or SSK 32
Custom Appeal 88-16
imposing a penalty as mentioned in Regulation 22 within
90 days from the submission of report by the Deputy Commissioner of
Customs or Assistant Commissioner of Customs under clause (5) of Regulation
20. However, when he decides to revoke the licence, it is imperative for him to
grant an opportunity of hearing to the customs broker in person.
9 The scheme of Regulation 20, reveals a procedure to be followed by revenue

for revocation of licence and the said procedure mandates following the
principle of natural justice and is based the principles of fairness and equity.
The said regulation affords an opportunity to the customs broker to defend an
action proposed against him, but at the same time, it sets out a time limit to be
followed at every stage of the inquiry. A show cause notice asking to show
cause as to why licence should not be revoked, is to be issued within a period
of 90 days from the date of receipt of offence report. The customs broker is
given 30 days time to submit his written statement of defence and also to
specify whether he proposes be heard in person. The Deputy Commissioner of
Customs or Assistant Commissioner of Customs,
who is nominated by the Commissioner of Customs would enquire into the
grounds with which the customs broker is charged and after taking into
consideration the documentary and oral evidence would prepare a report
within a period of 90 days from the date of issuance of show cause notice.
Once such report is submitted to the Commissioner of Customs, he would
again afford an opportunity to the customs broker to prefer a representation
on the same within a period of 30 days and then on receipt of such report the
Commissioner of Customs would take a final action within a period of 90 days
from the date of receipt of report of the Deputy Commissioner of Customs or
Assistant Commissioner of Customs. The whole process prescribes a time limit
with an intention that the proceedings initiated against the customs house
agent do not continue till infinity and are concluded within a prescribed time
frame since continuation of the inquiry for a prolonged period would result
into deprivation of means of livelihood of the customs house agent and would
keep him out of the business since the licence is under suspension. With this
prime objective, the time limit have been specified in SSK 34 Custom Appeal
88-16
Regulation 20 and the moot question involved before us is whether the
adherence to the time scheduled is so imperative that any violation or
infringement or deviation there from would result into a declaration of the
action as invalid.
10 The question, therefore, is whether the provision contained in Regulation

20 is mandatory or directory. The use of the word "shall" in normal
parameters be construed as mandatory and the word "shall" would be
required to be read as "must" unless and until it was essentially read as "may"
to achieve the legislative intention and to be construed in accordance with its
use in the provision. However, it cannot be laid down as an universal rule that
whenever the word "shall" is used in a statute, it would only mean to be of
mandatory nature, whereas the word "may", would be indicative of being
directory. However, use of such word is not the sole test or criteria, but the
said word shall be construed by taking into consideration the nature, design
and the consequences, which would flow from construing it one or the other
way. The Hon'ble Apex Court in the case of Delhi SSK 35 Custom Appeal 88-16
Air take Services Pvt Ltd and another Vs. State of West Bengal and another
reported in 2011(a) SCC page 354 has observed thus:
"where a statute imposes a public duty and proceeds to lay down the manner
and time frame within which the duty shall be performed. The injustice or
inconvenience resulting from a rigid adherence to the statutory prescriptions
may not be relevant factor in holding such prescriptions to be only directory.
For eg., when dealing with provisions relating to criminal law, legislative
purpose is to be borne in mind for its proper interpretation. It is said that the
purpose of criminal law is to permit everyone to go about the daily lives
without fear of harm to person or property and it is in the interest of everyone
that serious crime be effectively investigated and prosecuted. There must be
fairness to all sides. In a criminal case, the Court is required to consider the
triangulation of interests taking into consideration the position of the accused,
the victim and his or her family or the public.
The basic purpose of interpretation of statutes is further to aid in determining

either the general object of the legislation or the meaning of the language in
any particular provision. It is obvious that the intention which appears to be
most in accordance with convenience, reason, justice and legal principles
should, in all cases of doubtful interpretation, be presumed to be the true one.
The intention to produce an unreasonable result is not to be imputed to a
statute. On the other hand, it is not impermissible, but rather is acceptable, to
adopt a more reasonable construction and avoid SSK 36 Custom Appeal 88-16
anomalous or unreasonable construction. A sense of the possible injustice of
an interpretation ought not to induce Judges to do violence to the well settled
rules of construction, but it may probably lead to the selection of one, rather
than other, of the two reasonable interpretations. In earlier times, statutes
imposing criminal or other penalties were required to be construed narrowly
in favour of the person proceeded against and were more rigorously applied.
The courts were to see whether there appeared any reasonable doubt or
ambiguity in construing the relevant provisions right from the case of R.V.
Jones, ex p Daunton, the basic principles state that even statutes dealing with
jurisdiction and procedural law are, if they relate to inflation of penalties, tobe
strictly construed; compliance with the procedures will be stringently exacted
from those proceedings against liable to be penalised and if there is any
ambiguity or doubt, it will be resolved in favour of the accused / such person.
These principles have been applied with approval by different Court even in
India. Enactments relating to procedure in courts are usually construed as
imperative. A kind of duty is imposed on court or a public officer when no
general inconvenience or injustice is caused from different construction. A
provision of statute may impose an absolute or qualified duty upon public
officer which itself may be a relevant consideration while understanding the
provision itself."
The question therefore, is whether use of word "shall" as indicated in

Regulation 20 which requires the Commissioner of Customs to issue a notice in
writing to the SSK 37 Custom Appeal 88-16
custom broker within a period of
90 days from the date of receipt of offence report, is to be construed as
mandatory or directory. The distinction between a directory and mandatory
enactment is explained in Halsbury's Law of England, Simond's Edition,
Volume 36 in the following words:
"where a statute requires an act to be done within a particular time or in a
particular manner, the question arises whether the validity of the Act is
affected by a failure to comply with that time-limit prescribed. If it appears
that the Parliament intended disobedience to render the act invalid, the
provision in question is described as "mandatory", "absolute", imperative" or
"obligatory", if on the other hand compliance was not intended to govern the
validity of what is done, the provision is said to be "directory".
Crawford in statutory constitution, 1940 Edition has brought the distinction

between mandatory and directory provision in the following words "A statute,
or one or more of its provisions may be either mandatory or directory. While
usually in order to ascertain whether a statute is mandatory or directory, one
must apply the rules relating to the construction of statutes; yet it may be
stated, as a general rule, that those whose provisions relate to the essence of
the thing to be performed or to matters of substance, are SSK 38 Custom
Appeal 88-16
mandatory, and those which do not relate to the essence and
whose compliance is merely a matter of convenience rather than of substance
are, directory. So, a mandatory statute may be defined as one whose
provisions or requirements, if not complied with, will render the proceedings
to which it relates illegal and void, while a directory statute is one where non-
compliance will not invalidate the proceedings to which it relates.
In Maxwell on interpretation of statutes the principle is thus stated "The

general rule is that an absolute enactment must be obeyed or fulfilled exactly,
but it is sufficient if a directory enactment be obeyed or fulfilled substantially.
The above statement of law in Maxwell conveys the impression that even in
the case of a directory provision, omission in substantial compliance may
invalidate the act or proceedings.
In Govindlal Chhaganlal v. Agriculture Produce Market Committee reported in

AIR 1976 SC 263, the Supreme Court has approvingly quoted the following
passage from Crawford on statutory construction as under:
"The question as to whether the statute is
mandatory or directory depends upon the intent of the legislature and not
upon the language in which it is clothed. The meaning and the intention of the
legislature must govern and this is to be ascertained not only from the
phraseology of the provision, but by considering its nature, design and the
consequences of which would follow from construing it one way or other".
The Hon'ble Apex Court further observed :

"thus the governing factor is the manner and intent of the legislature which
should be gathered not merely from the words used by legislature but from a
variety and other circumstances and consideration. But the circumstances that
the legislature has used a language of compulsive force is always of great
relevance in the absence of anything contrary in the context indicating that a
permissive interpretation is permissible, the statute ought to be construed as
peremptory. One of the fundamental rules of interpretation is that if the words
of the statue are themselves precise and unambiguous, no more is necessary
than to expound those words in their natural and ordinary sense, the words
themselves in such case best declare the intention of the legislature".
In Raza Buland Sugar Co. Ltd vs Municlpal Board, Rampur, reported in AIR
1965 Supreme Court 895, while construing whether a provision is mandatory
or directory, the Hon'ble Apex Court observed that the determination in the
ultimate analysis depends on the law and facts gathered on SSK 40 Custom
Appeal 88-16
the infringement of the contention but by considering this
nature, this being a consequence which will follow from construing them in
one way or the other.
11 While construing the provision contained in Section 20 of the regulation

whether it is mandatory or directory and whether the word "shall" used in the
said regulation be construed as mandatory, it would be necessary to ascertain
the real intention of the legislature by carefully evaluating the whole concept
of the statute. The question whether the statute is mandatory or directory,
would depend on the intention of the legislature and not necessarily merely
by looking at the language in which it is clothed. It is mandatory for the Court
to look into the nature of the statute and the consequences which would
follow from construing it in one way or the other, the ambit of the other
provisions, the necessity of compliance of the provisions in question. The
circumstance, namely, the statute provides a contingency of the non-
compliance of the provisions, the fact that the non-
compliance of the
provision is or is not visited with some penalty, the consequences flowing
therefrom and above all SSK 41 Custom Appeal 88-16
whether the object of the
enactment is defeated by holding it to be directory and whether the object
would be achieved by construing it to be mandatory. If the provisions are
construed as mandatory, the act done in breach thereof necessarily will be
invalid, but if the provision is held to be directory then even though there is
no strict compliance with the provision, the act will be valid, though it may
give rise to some consequences, if provided by the statute. It is no doubt true
that the purpose of Regulation 20, which governs the Customs House agents is
to inculcate discipline and a pattern in discharge of their duties and working.
The regulation ensures to safe-guard the right conferred on the customs house
agent by conferring the minimum protection by prescribing a period of
licence and once such licence is granted unless and until there is a default on
part of the customs house agent, its renewal is assured. However, the default
on part of the Customs House Agent needs to be inquired into before depriving
the Customs House Agent of his licence. At the same time the interest of
revenue is also sought to be protected by the regulation which authorises the
Commissioner of Customs to revoke the licence and forfeit the SSK 42 Custom
Appeal 88-16
part of or whole of the security or even to impose a penalty in
the circumstances identified by the regulation. In order to maintain the
regime of discipline, the Commissioner is also authorised to initiate an action
in form of suspension of licence with immediate effect contemplating or
pending an inquiry. The imminence of the action, postponement of the
opportunity of hearing that Regulation 19 provides for post decisional hearing
when an action is taken to suspend the licence. Thus, the regulation aims at
securing interest of the customs house agent and also the revenue. Thus, the
urgency and expediency of the action permits the Authority to step in
immediately or with promptitude. A balancing of interests is achieved by
ensuring prompt action and avoiding undue delay in taking it to its logical
conclusion.
The question therefore is whether non-adherence to the time frame as

mentioned in regulation 20 would be so strictly construed so as to result in
declaring initiation of action itself invalid, if that is not adhered to. There
might be circumstances and situations which are not within the control either
of the customs house agent or the Revenue. It is SSK 43 Custom Appeal 88-16
possible that a customs house agent is unable to attend the proceedings on
account of his ill-health or any other unforeseen contingency, resultantly, the
proceedings are required to be postponed by extending the date for
submitting his written statement or submitting evidence, resultantly
postponing the final time limit prescribed. In such a situation, can the
provision be construed to be mandatory to the detriment of the customs house
agent, since it was beyond his control to respond to the allegations made
against him. Another contingency may occur, when the hearing in the
proceedings is completed, but on account of administrative exigency, the
Commissioner of Customs is transferred, can it be still said that the time line
was so mandatory that when the order was not passed on 16th day, the entire
action becomes invalid. It is also possible that the customs house agent avoids
to adhere to the time limit and does not file his reply under Regulation 19 (2)
and then takes advantage of the fact that the suspension was not revoked on
the 16 th day, irrespective of the fact that the alleged action is detrimental to
the interest of the revenue or the allegations levelled SSK 44 Custom Appeal
88-16
against him are of serious nature. In such circumstances, can it be
permissible that the customs house agent is entitled to take benefit of his own
wrong, on the ground that the process is not completed within the stipulated
period. In such circumstances, if the provision is construed in such a rigid
form and no flexibility is allowed, though it results into declaration of the
entire action of the revenue as illegal, would it ensure justice or defeats it?
In these circumstances, the principle that comes into foreplay is the one set
out in "Principles of Statutory Interpretation, Ninth Edition 2004 Justice G.P
Singh" is
"where a statute imposes a public duty and lays down a manner in
which and time within which the duty shall be performed; whether the strict
adherence to the time limit results into an injustice or inconvenience and this
may be a relevant factor in defining whether the provision is to be construed
as mandatory or directory".
In a situation where a public officer is cast with a duty and the power flowing
from a statute and he is expected to perform a duty within a specific time
limit, it will have to be examined that non-performance of the duty within the
stipulated time limit, would it render the entire action already SSK 45 Custom
Appeal 88-16
initiated illegal, merely because the public officer was not able to
adhere to the time limit. A particular statute may provide for a consequence of
not deciding an application within the period stipulated therein and may
contain a provision that if it is not decided within a particular time schedule, it
shall be deemed to be granted. If performance of a public duty is required to
be discharged within a specific time which also confers a right on a person,
the provision as to time limit will still have to be held as directory unless it is
shown that a person on whom the right is conferred, is prejudiced because of
non-performance of the duty within a specific time. Thus in case of T. V.
Usman vs Food Inspector, Tellicherry, reported in 1994 (1) SC 260, the time
limit prescribed by Rule 7(3) of the Adulteration Rules, which requires that the
public analyist "shall within the period of 45 days" deliver to the Legal Health
Authority a report of the result of his analysis has been held to be directory
unless the delay has prejudiced the right of the accused to have sample of the
food analysis by Central Food Laboratory, e.g., when the sample becomes unfit
for analysis because of the delay. If a statutory provision as to time limit is a
condition for SSK 46 Custom Appeal 88-16
exercise of a statutory power as
distinct from duty, the prescription as to time will be construed as mandatory
but whether it is a case of statutory duty or statutory power, the statute may
expressly or impliedly make the authority functus officio on expiry of the
prescribed period. In the words of Privy Council in case of Monterial Street
Railway vs. Normandin AIR 1917 P.C 142, the principle was stated thus:
"When the provision of a statute relates to performance of a public duty and
the case is such that to hold null and void acts, in neglect of this duty, would
work serious general inconvenience, or injustice to persons who have no
control over those who are entrusted with the duty, and at the same time
would not promote the main object of the legislature, it has been the practice
to hold such provisions to be directory only".
In that case the question involved was that whether omission to revise the
jury list in terms of the statute had the effect of invalidating the verdict of the
jury and it was held that the verdict of the jury cannot be avoided on account
of irregularities in due revision of the jury list.
Applying the aforesaid principle to Regulations 19 and 20, it can be safely

concluded that if the provision is construed to be mandatory, then in such
circumstances, mere SSK 47 Custom Appeal 88-16
non-adherence to the time
schedule would result into conferring a benefit upon a otherwise undeserving
Customs House Agent to have his suspension revoked, or to have the action of
revocation of his licence being declared invalid, though he would have been
charged with grave and serious allegations of indulging into any misconduct
rendering him unfit to transact the business at customs station. However, on
the other hand, it would also not be appropriate on part of the Revenue
Authorities to indefinitely postpone the proceedings and deal it in a casual
manner, by keeping the licence suspended for a considerably long period of
time, resultantly, keeping the customs house agent out of business, which may
be the only source of livelihood for him. The whole purpose of the CBLR-2013
being to frame a time line so that undue delay in the proceedings can be
avoided, and the balance will have to be struck between the strict adherence
to the said time schedule to such an extent that even a day's delay would prove
to be fatal and render the entire action invalid and on the other hand, to grant
such a discretion to the revenue to continue the said action of suspension of
licence for an indefinite period depriving the SSK 48 Custom Appeal 88-16
customs brokers of their right to carry on business on the basis of the licence,
on a spacious ground that the charges levelled against him are being enquired
into. Neither of these two extreme situations are ideal and balance will have to
be struck by construing that the time limit for completion of inquiry for
revoking the licence or imposing the penalty and keeping the licence under
suspension should be "Reasonable period", depending on the facts and
circumstances of each case. There cannot be any absolute principle, which can
be laid down to determine as what would be reasonable period but it would
be dependent on the facts and circumstances of each case since on one hand,
the purpose of prescription of the time limit by the Regulation is to cast a duty
on the Revenue Authorities to act within the time frame since it adversely
affects the interest of the licensee and on the other hand the licensee should
not be permitted to take an advantage of some delay at the instance of the
Revenue, which is beyond its control since the revenue administration needs
to be granted certain concessions which may be on account of administrative
exigencies, and the department working at different levels through different
persons. The SSK 49 Custom Appeal 88-16
principles of fairness and equity
demands that when there is deviation from the time schedule prescribed in
the Regulation, the Revenue enumerates the reasons and attributes them to an
officer dealing with it and also accounts for every stage at which the delay
occurs. Every endeavour should be made to adhere to the time schedule but in
exceptional circumstances, which are beyond the control of the revenue if the
time schedule is not adhered to, an accountability be fastened on the Revenue,
to cite reasons why the time schedule was not adhered to, and then leave the
decision to the adjudicating authority to examine whether the explanation
offered is reasonable or reflects casual attitude on behalf of the Revenue. This
is the only way how the Regulation can be made effective and worthy of its
existence so as to safe-guard the interest of the customs house agent, who is in
a position of the delinquent and faces an inquiry somehow similar to an
inquiry in disciplinary proceedings on one hand and the revenue in the
capacity of the administration on the other hand.
In Union of India Vs. R.S. Saini, 1999(2) SCC 151, SSK 50 Custom Appeal 88-16
the Supreme Court held that the office memorandum fixing the time limit for
completion of disciplinary proceeding is only a mid-line and non-compliance
of such office memorandum will not invalidate the punishment. The office
memorandum was held to be not construed as imposing rigid time line for
imposing of the order of punishment. Further in Topline Shoes Limited Vs.
Corporation Bank, in 2002(6) SCC 33, the Supreme Court did not accept the
submission raised before it that the said commission constituted under the
Consumer Protection Act, 1986 has no power to accept the reply beyond the
stipulated period of 45 days. The Apex Court held that said provision cannot
be construed as mandatory in nature though no consequences are prescribed
and the wording used is "not exceeding 15 days". It did not prescribe for any
kind of period of limitation and hence the provision was construed to be
directory in nature. Such type of provision, being procedural in nature, aimed
at speedy disposal of disputes, demanded adherence to the time schedule,
would fall short of creating any substantial right in favour of a party for
reason of its non-compliance. The provision contained in a statute which is
procedural in nature SSK 51 Custom Appeal 88-16
that employed the word
"shall" be held to be mandatory, if it did not cause any prejudice. The
emphasis, therefore, should not be upon the language employed in the
provision, but the Court will have to examine whether the provision is
intended to specify certain procedure or whether it confers certain rights in
the individual and casts a corresponding duty on the officer concerned. The
Court will have to examine as to if such a provision is construed to be
mandatory or directory, what is the effect or such a provision and whether its
non-
compliance would invalidate or render the proceedings void ab initio or
it would result into imposition of lesser penalty or in issuance of directions to
protect the individual against the action of the State. The language of the
statute, the intention of the legislature would determine the impact of non-
compliance in facts and circumstances of a given case, before the Court
construes a provision to be directory or mandatory. 12 The learned Counsel
for the Respondents have taken us through series of judgments delivered by
the various High Courts taking a view that the time limits in the CHALR for
issuance of show cause notice to the customs house SSK 52 Custom Appeal 88-
16
licencee and completion of inquiry within 90 days being sacrosanct. The
Delhi High Court in Indian Courier Pvt Ltd vs. Commissioner of Customs
(General) emphasized on the mandatory nature of the CHALR as regards the
time limit in the following words:
"6. The time limits in the CHALR, 2004 for issuance of the SCN to the CHA
licence holder and completion of the inquiry within 90 days of issuance of
such SCN are sacrosanct. The aforesaid time limits were engrafted into
Regulation 22 of the CHALR, 2004 by a Notification No.30/2010-Cus. (N.T.) dated
8th April, 2010. Simultaneously, the CBEC issued Circular NO.9/2010 dated 8th
April, 2010 clarifying the procedures governing the suspension and revocation
of CHA licence. In para 7.1 of the said Circular, it was noted as under:
"7.1 The present procedure prescribed for completion of regular suspension
proceedings takes a long time since it involves inquiry proceedings, and there
is no time limit prescribed for completion of such proceedings. Hence, it has
been decided by the Board to prescribe an overall time limit of nine months
from the date of receipt of offence report, by prescribing time limits at various
stages of issue of show cause notice, submission of inquiry report by the
Deputy Commissioner of Customs or Assistant Commissioner of Customs
recording his findings on the issue of suspension of CHA license, and for
passing of an order by the Commissioner of Customs.
Suitable changes have been made in the present SSK 53 Custom Appeal 88-16
time limit of forty five days for reply by CHA to the notice of suspension, sixty
days time for representation against the report of AC/DC on the grounds not
accepted by CHA, by reducing the time to thirty days in both the cases under
the Regulations."
12 The said judgment has been consistently followed by the Delhi High Court,
wherein the Court had taken a view that revocation of a CHA licence is bad in
law since the time limit for completion of inquiry in terms of Regulation 22 (5)
has not been adhered to. The Madras High Court in case of Masterstroke
Freight Forwarders Pvt Ltd Vs. C.C (I) Chennai 2016 (332) ELT 300 (Madras)
while dealing with the issue as to whether period of 90 days prescribed in
Regulation 20(1) of CBLR, 2013 are directory or mandatory, after referring to a
series of judgments held thus:
"The purpose for which such time limit has been prescribed is to curb the
smuggling of goods and in the result to cancel the licences of the brokers if
they are involved and to impose penalty. The interpretation of a statute must
always be to give a logical meaning to the object of the legislation and the aim
must be to implement the provisions rather than to defeat it. As laid down by
the Apex Court in the judgments relied upon by the learned counsel for the
petitioners, when a statute prescribes a thing to be done in a particular
manner, it must be performed in such a manner. Also, the use of SSK 54
Custom Appeal 88-16
the consequence of the action is the revocation of the
licence and it would also pave way for inaction by the officials breeding
corruption.
It is also to be noted that every act of breach by the Broker would entitle the
authorities to initiate proceedings from the date of knowledge of the offence.
It is only if the time limit is strictly followed, swift action can be initiated
against the Customs Brokers and the authorities can also be made
accountable. The Regulations only contemplate initiation of proceeding by
issuance of notice within 90 days. While, making out a prima facie case, the
respondents ought to have, without any shadow of doubt, treated the word
"shall" in Regulation 11 as "mandatory" and not "directory".
Therefore, when a time limit is prescribed in Regulations, which empowers

action in Regulation 18 and procedure in Regulation 20(1), the use of the term
"shall" cannot be termed as "directory". It is pertinent to mention here that the
CBLR, 2013 have replaced the CHA Regulations. The CHA regulations did not
have any time limit to complete the proceedings. Therefore, by a Circular
9/2010, dated 8-4-2010, the necessity to include a time limit for initiating action
was addressed by the Board after field inspection and by a notification dated
8-4-2010, amendments prescribing time period for initiating action and
completing proceedings was made. The same was given effect by notification
dated 20-1-2014. Whereas, under the CBLR, 2013 having found the necessity to
prescribe a period, the Central Board, the statutory authority had included the
same in the Regulations itself, when they were brought into force. Therefore,
when a time limit is prescribed in Regulations, which empowers action under
Regulation 18 by following the SSK 55 Custom Appeal 88-16
procedure in
Regulation 20(1), the use of the term "shall" cannot be termed as "directory".
Under such circumstances, the rule can only be termed as "Mandatory".
13 The learned counsel appearing for the licensee, by relying on the said
judgments would argue that the said Hon'ble High Courts have granted benefit
to the customs brokers on account of non-adherence to the time limit. Reliance
is also placed on the judgment of the said CESTAT West Zonal Bench, Mumbai
delivered in Appeal No.C/87322/15 in case of M/s.Maakrupa Forwarders Pvt.
Ltd Vs. Commissioner of Customs, Mumbai dated 18th October 2016. Perusal of
the said judgment, would reveal that Revenue had taken 1221 days to
complete the inquiry for which a period of 270 days is prescribed in CBLR,
2013 and in this backdrop, the Tribunal observed that due to inordinate delay
of exceptional nature in completing the proceedings, fundamental right of
work is being denied to the appellant and it was also observed that the
Customs Brokers who are unscrupulous, get the advantage of the delay and
people who are not guilty would continue to suffer the suspension and
revocation on account of delay by revenues due to lack of SSK 56 Custom
Appeal 88-16
responsibility.
The said judgment of the CESTAT reflects a extreme situation and the data
which was placed before the Tribunal revealed that inquiries had been
pending for more than five years and in this back drop, the Tribunal
commented about the inordinate delay. This is what precisely is to be avoided.
The order passed by the CESTAT cannot be said to be erroneous by taking into
consideration the enormous delay, reflecting the attitude of the Revenue,
which had failed to discharge its duty, causing serious inconvenience to the
Customs House Agent, which in any event, cannot be justified. However, the
said principle cannot be accepted as an absolute principle where the delay of
15 days has also been held to be inordinate and the licence came to be
restored. We do not propose to deal with these two extremities since we are of
the considered view that the mid-
line has to be drawn where the time line
may not be construed as so rigid, inflexible and a reasonable deviation is
permissible where delay is accounted for and the Revenue would be made
accountable in discharge of its statutory duty.
The principle, which is to be applied to construe
whether the Regulation is directory or mandatory, is to be tested by examining
the consequences of the Regulation being treated either way in the context of
the aim and object of the provision.
14 Adherence to the time schedule prescribed in the Regulation 20 in a rigid
way would lead to a situation where non-compliance with the time frame and
even deviation by a single day would resultantly invalidate the entire action
and the licence which is under suspension or which is revoked, is liable to be
restored. The procedural formality as required to be complied within the time
frame prescribed in the regulation, even if it is deviated for whatsoever
reason beyond the control of the revenue or the custom house agent would
result into consequences of declaring the entire action invalid if the provision
is construed as mandatory. On the other hand, if the provision the construed
as directory, the custom house agent would be deprived of his licence for
considerable long time, if the time schedule is not adhered to the Revenue at
its sweet choice would prolong the procedure SSK 58 Custom Appeal 88-16
and
which is a likely situation, no attempts would be made to complete the inquiry
within the stipulated period.
This is what has weighed in the mind of the High Courts while dealing with
the said regulation and holding the same to be mandatory.
The catena of judgments on which reliance has been placed to declare the
provision as mandatory have referred to the extraordinary delay caused at the
instance of the revenue in conducting inquiry against the custom house agent,
depriving them of their means of livelihood and it was observed that the
purpose of prescribed time limit was to safe-guard the interest of the custom
broker and smooth import and export of goods. By relying on a celebrated
principle, when a statute prescribes a thing to be done in a particular manner,
it must be performed in such a manner, the use of the word "shall" in the
Regulation has been construed as mandatory.
With due respect to the finding so recorded in the judgment of the Madras
Court in case of Masterstroke Freight Forwarders P. Ltd. vs. C.C.(I), Chennai-I,
reported in 2016 SSK 59 Custom Appeal 88-16
(332) E.L.T. 300 (Madras)
delivered by the learned Single Judge, the parameters of construing a
provision as mandatory or directory, when it deals with a discharge of a
public duty and a resultant consequence has not been specifically taken into
consideration. The salutary principle, whether statute imposes a public duty
and lays down the manner and time within which the duty shall be
performed, the injustice or inconvenience resulting from a rigid adherence to
the statutory prescription, is a relevant factor for holding such provision only
as directory has been completely overlooked. As observed by Justice DENMAN
in CALDOW versus PIXELL (1877) 2 CPD 562, "in considering whether the
statute is imperative, the balance may be struck between inconvenience or
sometime rigidly adhered to, or sometime departure from this direction". In
that case, it was held that where a public officer was directed by statute to
perform a duty within a specific time the case is established that the
provisions are only directory, as already discussed above. There might be
reason why such time limits cannot be adhered to and these reasons may be at
times attributable to SSK 60 Custom Appeal 88-16
the revenue and some time
to the customs house agent. Strict adherence to the said time limit and not
making it even slightly flexible would warrant a situation where even one day
deviation from the time line would be equally fatal as a delay of one year. This
surely is not the intention in framing the Regulation. Undisputedly, the
intention is to curb the delay in concluding the inquiries, however, it should
not be stretched to an extent where it would defeat the very purpose of the
Regulation, being to enforce a regime of discipline in the custom arena and it
would result in letting the miscreant set loose by taking benefit of deviation of
the time schedule. The said CESTAT West Zonal Bench, Mumbai in Unison
Clearing Pvt Ltd vs. Commissioner of Customs (General, Mumbai) (supra) has
in detail dealt with the Regulation 22 and has examined whether it has to be
construed as mandatory or directory. Relying on catena of judgments
delivered by the Hon'ble Apex Court, and specifically in Delhi Air take Services
Pvt Ltd and another Vs. State of West Bengal and another, CESTAT has
concluded that while deciding whether the time period is directory or
mandatory, it would be seen that the purpose of law prescribing it as
mandatory SSK 61 Custom Appeal 88-16
and consequently the absence of
provisions of consequences in case of non-compliance with the requirement
would indicate that the provisions are directory irrespective of use of the
word "shall". The CESTAT has concluded that if the time limits are construed as
mandatory and the matter is put to an end, the purpose of Regulation would
be defeated and so would be the intention behind framing such a Regulation.
On the other hand, if there is no consequence stated in the regulation for non-
adherence is a time period for conducting the inquiry, the time line cannot be
proved to be fatal to the outcome of the inquiry. Based on these observations
the Tribunal had held the Regulation is directory in nature. However, in the
present judgment which is impugned before us, the CESTAT has taken a view
contrary to its earlier view in Unison Clearing Pvt Ltd (supra) and after
referring to certain precedents where a view was taken that the regulations
are mandatory delivered by the Tribunal itself, the Tribunal was pleased to
quash and set aside the impugned order being not sustainable and allowed the
Appeals. It is to be noted that the Member Judicial (Ramesh Nair) who is a
party to the judgment delivered by the said CESTAT in Unison Clearing Pvt SSK
62 Custom Appeal 88-16
Ltd Vs. Commissioner of Customs (General Mumbai).
15 In view of the aforesaid discussion, the time-limit contained in Regulation
20 cannot be construed to be mandatory and is held to be directory. As it is
already observed above that though the time line framed in the Regulation
need to be rigidly applied, fairness would demand that when such time limit is
crossed, the period subsequently consumed for completing the inquiry should
be justified by giving reasons and the causes on account of which the time-
limit was not adhered to. This would ensure that the inquiry proceedings
which are initiated are completed expeditiously, are not prolonged and some
checks and balances must be ensured. One step by which the unnecessary
delays can be curbed is recording of reasons for the delay or non-adherence to
this time-limit by the Officer conducting the inquiry and making him
accountable for not adhering to the time schedule. These reasons can then be
tested to derive a conclusion whether the deviation from the time line
prescribed in the Regulation, is "reasonable". This is the only way by which the
provisions contained in Regulation 20 can SSK 63 Custom Appeal 88-16
be
effectively implemented in the interest of both parties, namely, the Revenue
and the Customs House Agent. 16 In the light of the aforesaid discussion, the
appeals filed by the Revenue succeed and the question of law framed in the
appeals is answered by holding that the CESTAT was not justified in setting
aside the order or suspension of the Customs Brokers Licence on the ground of
delay between suspension and the notice of deviation or omission and it
cannot be laid down as an absolute proposition of law that delay in taking
immediate action of suspension or initiation of inquiry within a period of 90
days would vitiate the action of the Commissioner. The matters are remanded
to the CESTAT for fresh adjudication in light of the question of law answered
in the present appeals.
[SMT. BHARATI H. DANGRE, J] [S. C. DHARMADHIKARI,J]

The Pr. Commissioner of Customs ... Vs Veena Shipping Agency Pvt. LTD On 19 April, 2018

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IN THE HIGH COURT OF JUDICATURE AT BOMBAY

ORDINARY ORIGINAL CIVIL JURISDICTION

CUSTOMS APPEAL NO.17 OF 2016

The Principal Commissioner

of Customs (General) Mumbai .. Petitioner

Unison Clearing Pvt.Ltd .. Respondent

CUSTOMS APPEAL NO.68 OF 2016

The Principal Commissioner

of Customs (General) Mumbai .. Petitioner

Rudolph Thomas Lobo & Co.(P) Ltd .. Respondent

CUSTOMS APPEAL NO.88 OF 2016

The Principal Commissioner

of Customs (General) Mumbai .. Petitioner

M.D.Shipping Agency .. Respondent

CUSTOMS APPEAL NO.4 OF 2017

The Principal Commissioner

of Customs (General) Mumbai .. Petitioner

Maa Krupa Forwarders Pvt.Ltd .. Respondent

CUSTOMS APPEAL (L) NO.49 OF 2017

The Principal Commissioner

of Customs (General) Mumbai .. Petitioner

Mahendra Shipping Agency .. Respondent

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SSK 2 Custom Appeal 88-16

CUSTOMS APPEAL (L) NO.53 OF 2017

The Principal Commissioner

of Customs (General) Mumbai .. Petitioner

K.M.Commercial Services P.Ltd .. Respondent

CUSTOMS APPEAL (L) NO.54 OF 2017

The Principal Commissioner

of Customs (General) Mumbai .. Petitioner

Kismat Clearing Agency .. Respondent

CUSTOMS APPEAL NO.6 OF 2017

The Principal Commissioner

of Customs (General) Mumbai .. Petitioner

Mehul and Co. .. Respondent

CUSTOMS APPEAL NO.6 OF 2018

The Principal Commissioner

of Customs (General) Mumbai .. Petitioner

Veena Shipping Agency Pvt.Ltd .. Respondent

CUSTOMS APPEAL NO.26 OF 2016

The Principal Commissioner

of Customs (General) Mumbai .. Petitioner

Ukinex Commercial Services Customs

Broker (CHA firm) .. Respondent

CUSTOMS APPEAL NO.9 OF 2016

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SSK 3 Custom Appeal 88-16

The Principal Commissioner

of Customs (General) Mumbai .. Petitioner

SSS Sai Shipping Services P.Ltd .. Respondent

NOTICE OF MOTION (APPEALS) LODGING NO.2404 OF 2017

CUSTOMS APPEAL LODGING NO.49 OF 2017

The Principal Commissioner

of Customs (General) Mumbai .. Petitioner

Mehendra Shipping Agency .. Respondent

NOTICE OF MOTION (APPEALS) LODGING NO.2491 OF 2017